With a $3 trillion national deficit this year and trillion dollar deficits expected to continue for years-to-come, there is an increasing anxiety about an economic collapse.  Today, the release of the Net International Investment Position (NIIP) heightened that anxiety . . . but unnecessarily.

The NIIP is focused on the amount of income we receive from our ownership of foreign assets, compared to the money we pay out to foreigners who own American assets.  For the second quarter, we ran the largest NIIP deficit in history.  In other words, we paid out more income to foreigners than we received from foreigners.

That deficit reflects the composition of assets owned by the U.S. compared to the type of U.S. assets owned by foreigners.  We primarily own equities, while the foreigners primarily own U.S. Treasuries.  Equity income is greater than interest paid by the U.S. Treasury.  During the second quarter, economies worldwide collapsed, and we received relatively little investment income on the foreign assets we own, while the U.S. Treasury continued paying the regular interest due to the foreign bondholders.

Nobody expects the dividend income from our foreign holdings to remain so low.  It will increase as the world recovers.  The NIIP deficit will self-correct.

But, if you just like to worry, you can always worry about our national debt, which is rapidly approaching $30 trillion.  Of course, now that we have adopted Modern Monetary Theory, our collapse has been postponed . . . until further notice.